Why Always Gilts

UK Gilt yields have reached levels not seen since 1998, driven by record-high macro uncertainty, persistent inflation, and a shift in market supply/demand as the BoE conducts quantitative tightening.

Key Takeaways

• 1.Gilt underperformance is primarily driven by a surge in term premium, reflecting weak UK growth, high inflation, and record-high macro uncertainty.
• 2.Supply-demand imbalances, including BoE quantitative tightening (QT) and declining pension fund demand, have exacerbated the rise in Gilt yields.
• 3.Recent Gilt yield increases are increasingly driven by fundamental shifts in inflation and central bank policy rather than just risk premiums.

Table of Contents

• Why Always Gilts?
• TRADE IDEAS
• Global Interest Rates Strategy
• Disclosure Appendix
• General disclosures

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